Grocery store giant The Kroger Company (KR) ended 2015 at its all-time intraday high of $42.75 as the stock began a bear market decline of 54% to its multi-year low of $19.69 set on Oct. 2, 2017. The stock was in recovery mode as 2018 began, continuing a bull market run of 60% to its Jan. 30 high of $31.45. Then the stock began a period of share price volatility.
Kroger reported earnings on March 8, and a negative reaction resulted in the setting of its 2018 low of $22.85. The decline from the January high to this low was a bear market move of 27%. The stock then moved sideways along its 200-day simple moving average until a "golden cross" formed on June 14. This bullish signal set up the possibility of a positive reaction to earnings on June 21, which proved to be the case. The bull market run from the 2018 low to the 2018 high of $32.74 set on Sept. 6 totaled 43%. This history of volatility is a reason why investors need a strategy based upon daily and weekly charts.
Analysts expect Kroger to report earnings per share of 38 cents to 40 cents before the opening bell on Thursday, Sept. 13. A key to this earnings report is that grocery stores in a transition of shifting to online shopping. According to Zacks Equity Research, Kroger has been introducing new items, digital coupons, online orders and pick-up areas at its stores. Margins are at issue, as these initiatives are mainly in response to Amazon.com, Inc. (AMZN) and its expansion plans for Whole Foods Markets. (See also: Don't Underestimate Kroger's Retail Power.)
The daily chart for Kroger
Kroger has been above a "golden cross" since June 14, when the stock closed at $26.16. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. The stock subsequently traded higher to its 2018 high of $32.74 set on Sept. 6. The horizontal line at $28.41 is my value level for September. My annual and semiannual risky levels are above the chart at $38.49 and $39.54, respectively.
The weekly chart for Kroger
The weekly chart for Kroger is positive but overbought, with the stock above its five-week modified moving average of $30.59. The stock has stalled around its 200-week simple moving average, or its "reversion to the mean" of $31.81 for the past five weeks. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 87.16 versus 88.16 on Sept. 7, with both readings above the overbought threshold of 80.00.
Given these charts and analysis, investors should buy Kroger shares on weakness to my monthly value level of $28.41 and reduce holdings on strength to my annual and semiannual risky levels of $38.49 and $39.54, respectively. (For more, see: Kroger Bets on Robots With Ocado Deal.)